Citation Nr: 1242437 Decision Date: 12/12/12 Archive Date: 12/20/12 DOCKET NO. 10-33 109 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Philadelphia, Pennsylvania THE ISSUES Entitlement to a waiver of compensation overpayment in the amount of $8,730, to include whether the debt resulting from the overpayment was properly created. REPRESENTATION Veteran represented by: Veterans of Foreign Wars of the United States ATTORNEY FOR THE BOARD Catherine Cykowski, Counsel INTRODUCTION The Veteran had verified active duty service from March 1976 to August 1984 and from June 1991 to May 1993. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a January 2010 determination by the Committee on Waivers and Compromises (Committee) at the Department of Veterans Affairs (VA) Regional Office in Philadelphia, Pennsylvania (RO). The appeal is REMANDED to the RO via the Appeals Management Center (AMC), in Washington, DC. VA will notify the appellant if further action is required. REMAND A review of the record indicates that the debt at issue in this case was created as a result of the Veteran's incarceration after conviction of a felony. A veteran who is incarcerated in a federal, state, or local penal institution in excess of sixty days for conviction of a felony committed after October 7, 1980 and has a combined rating of 20 percent or more shall not be paid compensation in excess of the amount payable for a disability evaluated as 10 percent disabling beginning on the sixty-first day of incarceration. 38 U.S.C.A. § 5313 (West 2002); 38 C.F.R. § 3.665 (2012). In cases where there is no fraud, misrepresentation, or bad faith on the Veteran's part with respect to the overpayment at issue, and, therefore, waiver is not precluded pursuant to 38 U.S.C.A. § 5302(a), in order to dispose of the matter on appeal, a determination must be made as to whether recovery of the indebtedness would be against equity and good conscience, thereby permitting waiver under 38 U.S.C.A. § 5302(a) and 38 C.F.R. §§ 1.963(a), 1.965(a). The pertinent regulation provides that the standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965(a). The elements of equity and good conscience are as follows: (1) fault of debtor, where actions of the debtor contribute to creation of the debt; (2) balancing of faults, weighing fault of debtor against VA fault; (3) undue hardship, whether collection would deprive debtor or family of basic necessities; (4) defeat the purpose, whether withholding of benefits or recovery would nullify the objective for which benefits were intended; (5) unjust enrichment, failure to make restitution would result in unfair gain to the debtor; (6) changing position to one's detriment, reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation. In a statement submitted to the RO in March 2009, the Veteran informed the RO that he was arrested in October 2008. He reported that no date had been set for his trial. In a letter dated in April 2009, the RO advised the Veteran that the law requires VA to reduce compensation benefits to the 10 percent evaluation on the 61st day after incarceration following conviction of a felony. The Veteran was advised that, since he had not been convicted of a felony, no adjustment would be made to his VA benefits. The letter advised the Veteran to contact VA if he was later convicted of a felony to provide the date of conviction, and the name and address of the correctional facility. The Veteran submitted a statement to VA in August 2009 advising the VA of his incarceration. In a statement dated August 17, 2009 and received by the RO on August 21, 2009, the Veteran indicated that he was sentenced to four years in the custody of the Florida Department of Corrections on June 24, 2009. In October 2009, the RO contacted the Florida Department of Corrections. The RO requested information about whether the Veteran was convicted of a felony and requested information about the date of his conviction and if he had been released. In November 2009, the Florida Department of Corrections informed the RO that the Veteran was convicted of a felony and was confined following his conviction on June 24, 2009. In December 2009, the RO sent the Veteran a letter, advising him that the RO had received evidence that he was incarcerated after conviction of a felony on June 24, 2009. The letter stated that, under 38 C.F.R. § 3.665, his VA compensation benefits would be reduced to the lesser of the two following amounts after the 61st day of incarceration following conviction of a felony: a) the amount payable for a disability evaluated as 10 percent disabling if the combined disability evaluation is 20 % or more, or; b) the amount equal to one-half the 10% rate if the combined evaluation is 10%. The letter advised the Veteran that the law required that his compensation benefits be reduced to $123 effective August 24, 2009. The Veteran submitted a statement to the RO in October 2009. The Veteran noted that he had informed the VA of his incarceration. In a December 2011 brief, the Veteran's representative also argued that the Veteran notified the VA of his incarceration. Based on the statements by the Veteran and his representative indicating that VA was notified of the Veteran's incarceration, the Veteran appears to be challenging the validity of the creation of the debt. In January 2010, the Committee on Waivers and Compromises considered the Veteran's claim for a waiver of the debt. The Committee denied the Veteran's claim for a waiver. The Committee decision found that the Veteran was at fault in the creation of the debt due to his incarceration. In Schaper v. Derwinski, 1 Vet. App. 430 (1991), the United States Court of Appeals for Veterans Claims (Court) held that, before a claim for waiver of an overpayment may be adjudicated, the matter of whether the overpayment was properly created must first be addressed if the appellant asserts the invalidity of the debt. The VA General Counsel has reinforced this obligation by holding that where the validity of a debt is challenged that issue must be developed before the issue of entitlement to waiver of the debt can be considered. VAOGCPREC 6-98. The issue of whether the overpayment was validly created is inextricably intertwined with the issue of whether the Veteran is entitled to a waiver of an overpayment in the amount of $8,730. As such, the Board finds that the validity of the debt matter must be adjudicated prior to appellate review. See Harris v. Derwinski, 1 Vet. App. 180 (1991). Accordingly, the case is REMANDED for the following action: 1. The RO/AMC should prepare an audit of the Veteran's disability compensation account, clearly setting forth the time period of the overpayment at issue to include the month and year when the overpayment began and the month and year when it ended. The total amount of the overpayment should be indicated in the audit. Associate the audit report with the claims folder, and send a copy to the Veteran and his representative. 2. After completion of the above, and any other development deemed necessary, adjudicate the issue of the validity of the debt and readjudicate the issue of entitlement to waiver of compensation overpayment in the amount of $8,730. If the sought on appeal is not granted, the Veteran and his representative, should be furnished an appropriate supplemental statement of the case and afforded an opportunity to respond. The appellant has the right to submit additional evidence and argument on the matter or matters the Board has remanded. Kutscherousky v. West, 12 Vet. App. 369 (1999). This claim must be afforded expeditious treatment. The law requires that all claims that are remanded by the Board of Veterans' Appeals or by the United States Court of Appeals for Veterans Claims for additional development or other appropriate action must be handled in an expeditious manner. See 38 U.S.C.A. §§ 5109B, 7112 (West Supp. 2011). _________________________________________________ K. J. ALIBRANDO Veterans Law Judge, Board of Veterans' Appeals Under 38 U.S.C.A. § 7252 (West 2002), only a decision of the Board of Veterans' Appeals is appealable to the United States Court of Appeals for Veterans Claims. This remand is in the nature of a preliminary order and does not constitute a decision of the Board on the merits of your appeal. 38 C.F.R. § 20.1100(b) (2009).